What Investors Should Know about Ascott Residence Trust’s Latest Earnings

Ascott Residence Trust (SGX: A68U) released its fourth-quarter earnings report yesterday. The reporting period was from 1 October 2014 to 31 December 2014.

Ascott Residence Trust is managed by a wholly-owned subsidiary of Capitaland Limited (SGX:C31). The REIT’s (real estate investment trust) property portfolio primarily covers serviced residences or rental housing properties. As of 31 December 2014, it had 90 properties with 10,502 apartment units in 37 cities.

You can catch the REIT’s earnings for the previous quarter here.

Financial highlights

Here’s a rundown on the financial figures for Ascott Residence Trust’s latest earnings announcement:

  1. Revenue rose to $95 million in the fourth quarter, up 13% from the quarter a year ago. For the full financial year 2014, revenue was up 13% to $357 million compared to 2013.
  2. Gross profit for the quarter rose by 10%. It came in at $45.7 million, compared to $41.6 million for the same quarter a year ago. For the full financial year 2014, gross profit was up a healthy 12% to $180 million compared to 2013.
  3. Distribution per unit (DPU) for the quarter will be 2.16 cents, a 62% increase from 1.33 cents in the fourth quarter last year.  The REIT closed out 2014 with 8.2 cents in DPU for the year, a decline from 8.4 cents DPU in 2013.
  4. The total portfolio value stands at $3.8 billion, with an adjusted net asset value per unit of $1.37.

Foolish investors might want to keep up an eye on a REIT’s debt profile. The debt profile may provide clues on how a REIT is funded, and its sensitivity to the interest rate environment. These are summarized for Ascott Residence Trust below.

Gearing ratio 38.5%
Interest cover ratio 4.3 times
Weighted Average Debt to Maturity 4.4 years
Fixed Rate Borrowings 80%
Effective Borrowing Rate 3.0%
Total borrowings $1.56 billion

Source: REIT earnings presentation

During the quarter, Ascott Residence Trust issued S$150 million in fixed perpetual securities which carry a fixed interest rate of 5% per annum. A test in flexibility of funding for the REIT will come in the financial year 2015 and 2016, when about 33% of its loans progressively become due. The progress in refinancing of debt is where Foolish investors should keep a watchful eye on.

Operational highlights

For the fourth quarter of 2014, Ascott Residence Trust benefited from higher revenue from China and Japan. For the period, the REIT also completed acquisitions of a 206-unit hotel in Japan, and three serviced residences in Australia. Looking forward, Mr. Lim Jit Poh, Chairman of the REIT manager had this statement to add:

“Ascott REIT made remarkable achievements in 2014, ending the year with a strong quarter. We acquired nine quality assets with over 1,800 units across seven cities for a total of S$559.1 million. They were one property each in Fukuoka and Tokyo as well as our first serviced residences in Kuala Lumpur, Dalian, Wuhan, Xi’an and Greater Sydney. As a result, Ascott Reit’s portfolio has expanded to more than 10,500 apartments units. Its asset size has also quadrupled to S$4.1 billion since its initial public offering, making it the largest hospitality trust listed on the Singapore Exchange by total asset value.

In 2015, we will continue to actively seek accretive acquisitions in key cities of Asia Pacific and Europe to enhance Unitholders’ returns. We expect the operational performance of our properties to remain healthy given Ascott Reit’s resilient extended-stay business model.”

Foolish summary

Ascott Residence Trust last traded at S$1.28 yesterday. This translates to a historical price-to-book ratio of 0.93 and a distribution yield of around 6.4%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.